Prudential Financial (NYSE:PRU), not to be confused with Prudential plc (NYSE:PUK) of the U.K., is one of the largest life insurers in the world. Negative overall sentiment on any financial company has sent its stock toward its lowest levels over the past year. An appealing valuation and decent growth prospects overseas bode well for future shareholder returns.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Recent Developments
On May 22, 2012, Prudential held its annual investor day and committed to raising its return on equity to between 13 and 14% by 2013. Implicit in this assumption is growth in its investment portfolio and stock market returns of 8% over the next couple of years. International growth, especially in Japan and parts of Asia, is expected to be the key growth driver. Cost cutting and share buybacks are also expected to make some positive impacts on per-share profits over the next couple of years.

SEE: A Breakdown Of Stock Buybacks

European Fears
Unlike U.K. rivals Prudential plc or Aviva (NYSE:AV), Prudential has minimal business exposure to Europe. As of the end of 2011, its primary exposure stemmed from its investment portfolio, which held roughly $17 billion in European sovereign government bonds, financial institutions and other entities. Though large in absolute levels, it is quite muted in the context of Prudential's investment portfolio of $355 billion and total asset base of $625 billion.

SEE: Investing In Sovereign Bonds

Outlook and Valuation
For all of 2012, analysts project total revenue growth of 9% and total revenues of nearly $43 billion. The consensus earnings estimate currently stands at $6.55 and is expected to rise nearly 19% to $7.76 for 2013. Based off book value of $74.35, this represents return on equity levels of 8.9 and 10.5% and forward P/E of seven and six, respectively.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
Prudential operates primarily in the U.S. and Japan, which are the two largest life insurance markets. According to a study provided in its investor day presentation, the market share of the global life insurance market came in at 27 and 24%, respectively, with the rest of Asia (excluding Japan) the next largest at 23%.

Japan is expected to be a future growth driver. Prudential is a leader domestically and now the third largest player in Japan, with a share of around 10.4%. Other rivals include Sumitomo Mitsui Financial Group Inc. (NYSE:SMFG) and even Sony (NYSE:SNE). Overall, the combination of decent international growth prospects, prospects for improved shareholder profits and a compellingly low valuation, bode well for future shareholder returns.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center